Nov 26, 2008

Voluntary layoffs? Think real hard first

To piggy back on my earlier post on the subject, asking people to voluntarily leave their current job, in order to cut costs, can backfire:

The Globe and Mail: Voluntary layoffs seen backfiring

The problem with such an approach is that employers see employees as only a number on the balance sheet. And if they can set that number low enough to have a high number on the bottom line, they think they have won. Wrong on so many counts!

When laying off employees, you do much more than reduce your expenses:

  • You affect morale, especially if you do it over and over again. Cut once, cut deep.
  • You affect productivity, especially if you announce layoffs weeks ahead of the actual cut. By the time you actually make the cut, you may have more than expected because people will tend to focus on the expected bad news, prepare their resumes, and so on. When your focus is not on your job (for whatever reason), performance will almost always suffer;

  • With voluntary layoffs, you run the risk of losing even more if your best people decide that they want to leave. Your performance will automatically be reduced, because that star performer leaves not only with his her salary (a win on your balance sheet) but also with the accompanying results (a loss that will outweigh the win on the balance sheet).

Voluntary layoffs may seem like a good plan, that humanizes the layoff process, but you need to think of the company in the long term. Sometimes, saving money can cost much more than you expect.

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